In the name of land conservation, science and the environment, the Smithsonian Institution has in effect created a vast subsidized housing and farming preserve here along the shores of the Chesapeake Bay.

The Smithsonian has spend over $1.7 million since 1965 buying up hundreds of acres of land along the Rhode River, land that in some cases the Smithsonian allows former owners to farm for free. In two cases, the Smithsonian has agreed to let former owners live free of charge in their former manor houses until their deaths.

In one instance, that of Ernest N. Cory Jr. - an attorney indicted along with Maryland Gov. marvin Mandel on charges of political corruption - the Smithsonian agreed to buy a 100-foot yacht that Cory no longer wanted as well as take over the monthly mortgage payments on his mansion and pay the property taxes on his 17-acre estate until Cory and his wife die in exchange for the Cory property.

In addition, Cory said in a recent interview, he was able to take substantial tax deductions as a result of the transaction. That was because he had his land appraised for over $11,000 an acre in 1965 and the Smithsonian paid him substantially less than that, resulting in a tax loss for Cory.

The prime farmland, shorefront property, wooded areas and pasture land that comprised the historic farms and estates the Smithsonian purchased are now part of a land preservation and research facility here called the Chesapeake Bay Center for Environmental Studies, a part of the Smithsonian.

The Smithsonian is so sensitive about its land purchases and other activities here that Chesapeake Bay Center employees were warned last week not to talk to any reporters. All inquiries about the Center were referred to Smithsonian officials in Washington, who demanded that all questions be submitted in writing.

However, it was possible to piece together - using Anne Arundel County land records and other sources before submitting written questions - a history of the financial agreements that led to creation of the Center, which now receives $500,000 in federal operating support.

The Senate Appropriations Subcommittee on the Interior and Related Agencies has ordered a General Accounting Office audit of the Smithsonian's books, reflecting the subcommittee feeling that the Smithsonian has been less than forthcoming about its spending of $100 million a year in federal money and approximately $11 million a year in private funds.

The story of the Chesapeake Bay Center provides a textbook example of the way the Smithsonian has gotten a large project going with private donations and then gone to Congress for federal money to operate it. That method of operation is a primary concern among the senators who asked for th audit.

Last year, the Center used part of its money to hire Michael Singer, an artist, to "construct a series of marsh grass pieces," in marshland on the Smithsonian property.

Center employees were then transported by boat to see the marsh grass sculptures before they were blown away this winter. Singer, according to the Smithsonian, received $1,500 for his work.

For the most part, however, the Center does scientific research on pollution and the environment, and Center scientists have published any number of papers in scientific journals.

The history of the Smithsonian's involvement in and around the Chesapeake Bay began in 1962, when Robert Lee Forrest, an eccentric millionaire, left his estate, Java Farm, and $1.7 million in cash and securities to the Smithsonsian.

During the mid-1960s, the Smithsonian got large sums from the Ford Foundation as well as other groups to buy land adjacent to Java Farm. The stated object was to save the whole area from development and to keep it in its state of pastoral beauty.

Income from Forrest's $1.7 million bequest was not - and has not ever, according to the Smithsonian - been used to purchase property along the Bay or to directly offset operating costs of the Center. The Forrest money was put into the Smithsonian's unrestricted trust fund, which is used for whatever the Smithsonian wants the money to be used for. Some of the money, the Smithsonian said, has "been used for various purposes at the Center.

After additional land was acquired, a research facility, eventually named the Chesapeake Bay Center for Environmental Studies, was established on the 1,700 Smithsonian property. Its purpose was environmental education and research designed to compare the ecological properties of mature forests, oil fields, agricultural lands and residential areas to determine how these land uses effect the amount and composition of runoff into marshes and estuarine waters."

In pursuing that goal, the Smithsonian has made arrangements with the local gentry - some of them well connected members of families whose forebears have lived in this part of Maryland since the 18th Century - that allows them to continue to live a life many of them could no longer otherwise afford.

Cory, for example, has been forced to ask the U.S. District Court in Baltimore to appoint a public defender to represent him at his second trial along with Mandel. Cory said his legal troubles have ruined him financially and, were it not for the deal he consummated 12 years ago with the Smithsonian, he and his family probably could no longer afford their Corn Island estate.

"Life tenancy" agreements of this kind usually involve gifts of property to charitable institutions - not sales of property. Charles R. Rinaldi, chief of the land acquisition division of the National Park Service, said his agency is prohibited from engaging in agreement (such as assumption of mortgage and tax payments, free use of farm or pasture land) like those entered into by the Smithsonian.

The Washington Post submitted the following question last week: "Why is the Smithsonian permitting individuals to farm land on (Center property) free of charge?"

The Smithsonian's full, unedited response: "The acreage being farmed is part of a major study on the effects of land use on biota and part of an overall effort to establish a mossie c of various land uses at CBCEs (the Center). Abandoned farms are not natural in a changing rural/urban area, thus they form something of a control situation.

"Thus, it is crucial to the study that a significant portion of the land be in farming and, if the individuals now farming this acreage were not doing so, the CBCES would have to undertake that task.

"In addition, the farmers involved also provide some security and patrolling services on the acreage they farm, by virtue of their presence. All of this makes it worthwhile to the SI to permit these farmers to farm the CBCES acreage they do without change to them."

As for the Corys, the Smithsonian was asked why it finds it advantageous to allow them to live at Corn Island free of charge. The Smithsonian responded that:

"It is not a question of 'permitting' the Corys to live where they do. The Corys live there as life tennants. Under the terms of the transaction, the SI has no rights to occupy the otherwise control who occupies the house until the death of both Mr. and Mrs. Cory, or a period of 20 years from the date of the transaction, whichever is later."

Rinaldi said the Park Service would, in a case such as this, deduct 1 per cent a year from the agreed upon sales price for a piece of residential property for every year the former owners are expected continued to occupy it."

The Smithsonian says that it paid Cory a total of $125,000 for his Cora Island property, including the assumption of a $68,000 mortgage on his house and the assumption of a $30,000 mortgage on his boat, the "Elida."

It is not entirely clear why the Smithsonian agreed to take the boat, which was reportedly 65 years old at the time and is said to have sunk at its moorings shortly after the Smithsonian took possession of it. (The Smithsonian was asked these questions but did not answer them.)

In any case, the Smithsonian acknowledged in writing that the boat a yawl, was "partially refurbished" while in the Smithsonian's possession and sold two years after the Smithsonian bought it for $3,750 - a loss of approximately $26,000.

In answer to another written question, the Smithsonian said it actually purchased 1,297 of the over 1,700 acres that make up the Chesapeake Bay Center. The cost of these purchases was $1,771,300 - or almost $1,400 an acre.

According to the Smithsonian it raised a total of $1,520,000 largely from the Ford Foundation and various Mellon family foundations, to purchase the land. It obtained Mortgages to cover the remaining $250,000 worth of land.

Two of these mortgages remain outstanding. The Smithsonian was asked in writing, but failed to answer, where the funds come from to pay off these mortgages.